- 47% Depreciation: Depreciated by 47% year-to-date against the US dollar
- 43% Value Loss: The RBZ's unilateral devaluation of the ZiG resulted in deposit holders losing 43% of the value in their assets
- Bleak Outlook: Government anticipates a further 52% depreciation of the ZiG in 2025
Harare- The Zimbabwe currency ZiG has experienced a significant depreciation of 47% year-to-date, marking one of the most substantial declines since its inception.
The ZiG, introduced in April, was initially perceived as a catalyst for economic growth, but it is poised to succumb to the same fate as its predecessors due to the absence of meaningful policy interventions to anchor the currency and rectify past mistakes.
The Reserve Bank of Zimbabwe (RBZ) unilaterally devalued the ZiG, resulting in a current official exchange rate of 1:25 in late September.
The move, which saw the official exchange rate jump to 1:25, from 1:13 resulted in ZiG deposit holders losing a whopping 43% of the value in their assets.
This decision was predicated on the assumption that the gold reserves held by the RBZ would be sufficient to maintain a fixed exchange rate.
However, the parallel market pressures, which at one point resulted in a 100% divergence between the official and parallel market rates, exposed the vulnerabilities of the official exchange rate.
The commerce sector responded by adopting crafty strategies, prompting authorities to threaten punitive action against errant businesses accused of manipulating the exchange rate.
Meanwhile, the RBZ continued to expand the money supply, with M0 levels increasing by nearly 100% between June and August.
The outlook for the ZiG remains bleak, with the government anticipating a further depreciation of 52% in 2025.
This projection suggests a lack of stability in the currency market and an expected deterioration of economic conditions.
Suppliers relying on exchange rates of 1:30 ZWG per USD will need to adapt to an average rate of over 45 ZWG per USD in 2025, leading to pricing challenges, exchange rate volatility, and increased inflation.
These developments may precipitate a spiraling inflationary environment, with Equity Axis analysts projecting an exchange rate of 1:55 ZWG per USD by year-end 2025, under conservative estimates.
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